October 8, 2009

Industrial R&D is suffering from a recent decline in funding

US industrial research and development (R&D) spending, always a key indicator of manufacturing trends, has dropped off since 2001. Yesterday, I mentioned that a great deal of valuable info could be gleaned from the "Facts about Modern Manufacturing" report from the Manufacturing Institute, and this insight on R&D is an eye opener.

Based on statistics from the Organization for Economic Cooperation and Development (OECD), the Manufacturing Institute reports that industrial R&D in the US only accounts for about 2.6% of the GDP. This percentage had been climbing since the mid-1990's to a peak in 2001, but has since slid back to previous levels. Though some R&D incentives are included in the government's recent stimulus package, product development research has been primarily left up to private industry.
Federal government support for basic research, a key element in innovation, has declined from a height of nearly 2.5 percent of GDP in the heyday of the Apollo program to only about 0.3 percent in recent years. - Manufacturing Institute report

The American R&D funding remains consistent with most other industrialized nations, but countries like China, Brazil and India will not settle for this status quo. The OECD statistics of all member countries have shown, on average, a steady increase of R&D share of GDP since 1996.

As mentioned in previous posts, product development is a key factor toward manufacturing success and profit growth. If product development investment trends flatlines, so does manufacturing profits.

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